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Hedge Funds Have Never Been More Bullish On Winmark Corporation (WINA)

“October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being ’08 and the Crash of ’87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the ’87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March ’09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher.” This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.

Winmark Corporation (NASDAQ:WINA) investors should be aware of an increase in support from the world’s most elite money managers of late. WINA was in 8 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 7 hedge funds in our database with WINA holdings at the end of the previous quarter. Our calculations also showed that WINA isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Roger Ibbotson Zebra Capital

We’re going to take a glance at the new hedge fund action surrounding Winmark Corporation (NASDAQ:WINA).

What have hedge funds been doing with Winmark Corporation (NASDAQ:WINA)?

At the end of the fourth quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in WINA a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

WINA_may2019

Among these funds, Nine Ten Partners held the most valuable stake in Winmark Corporation (NASDAQ:WINA), which was worth $53.4 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $30.2 million worth of shares. Moreover, GLG Partners, Millennium Management, and D E Shaw were also bullish on Winmark Corporation (NASDAQ:WINA), allocating a large percentage of their portfolios to this stock.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Zebra Capital Management, managed by Roger Ibbotson, established the largest position in Winmark Corporation (NASDAQ:WINA). Zebra Capital Management had $0.2 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also initiated a $0 million position during the quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Winmark Corporation (NASDAQ:WINA) but similarly valued. These stocks are Amalgamated Bank (NASDAQ:AMAL), Dime Community Bancshares, Inc. (NASDAQ:DCOM), SpartanNash Company (NASDAQ:SPTN), and Lindblad Expeditions Holdings Inc (NASDAQ:LIND). This group of stocks’ market valuations resemble WINA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMAL 6 71103 -3
DCOM 9 35352 -4
SPTN 16 39053 2
LIND 14 108364 0
Average 11.25 63468 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $86 million in WINA’s case. SpartanNash Company (NASDAQ:SPTN) is the most popular stock in this table. On the other hand Amalgamated Bank (NASDAQ:AMAL) is the least popular one with only 6 bullish hedge fund positions. Winmark Corporation (NASDAQ:WINA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on WINA, though not to the same extent, as the stock returned 17% and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.

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